InsiderOnline Blog: February 2011

We can’t really say whether the argument below by Richard Epstein is on solid constitutional grounds, but it does explain nicely how the collective bargaining rights at the center of the Wisconsin brouhaha are the linchpin of a system of malfeasance:

[A] principled but vigorous court could, and should, knock out these terrible collective bargaining arrangements on constitutional grounds. All officers and directors of a corporation have a duty of loyalty to the firm, a duty that runs afoul of any arrangements whereby management parties engage in self-dealing transactions that loot the corporation of its assets. It is not that every self-dealing transaction is necessarily infirm. But all of them should be examined to see whether the corporation has received “fair value” from its trading partner for the money paid out. The simple point is that it is a discreet form of corporate looting to sell something to an outsider for $500 when it is worth $5,000, or to buy services from that outsider for $5,000 when they are worth only $500.

As a constitutional matter, this intuition is captured in what I like to call the “givings” clause, which is nowhere in the written Constitution, but which is part of the elusive “public trust” doctrine that grew up to prevent government giveaways of state lands and other assets. Theoretically, this imputed provision is the analytical twin to the Takings Clause, which is in the written Constitution. The givings clause reads: “nor shall public property be given to private parties, without just compensation.” A rule that works for corporations should work for governments. Those bloated union pensions and salaries were the product of the illicit gift of collective bargaining rights by legislatures, who by their oath and position are fiduciaries for the public, not the unions. But this case of abject self-dealing should make these contracts “voidable” so that they can be set aside, if needed, by the government, after which these benefit packages could be modified to match comparable packages in the private sector. Once courts realize that they have a duty to stop these government giveaways, there is a good chance that we will be able to put the public treasury in order. [From “The Wisconsin Shoot Out on Public Unions,” Defining Ideas, February 22, 2011.]